fbpx

ERC: Having a mortgage in later life becoming more accepted

Jake Carter

August 18, 2021

mortgage product range

One in three (34%) homeowners already think it is becoming more acceptable to have a mortgage in later life, according to the Equity Release Council’s (ERC) Home Advantage report.

An estimated 32% of those with a mortgage did not believe that they will have paid it off by the time they retire.

People in their 30s were almost twice as likely to agree than disagree (29% versus 16%) that having a mortgage in later life can be a positive step that provides more financial freedom and flexibility.

Among homeowners in their 60s, 38% viewed their mortgage as an investment in their future because they have built up an asset over time.

Far more (57%) were interested in accessing money from the value of their property in later life; however, 61% people in their 60s were unsure if there are any differences between lifetime or retirement mortgages.

Two in three (66%) people in work believe owning their own home will improve their financial prospects in retirement.

At today’s mortgage rates, homeownership could deliver a financial advantage of £326,000 over 30 years compared with renting, even without the potential added benefits of rising house price or extra savings returns.

More than two-thirds of homeowners (68%) were confident about their financial future, compared with fewer than half (45%) who do not own their own home.

The data also found that nearly half (48%) of mortgaged homeowners said they save more because their loan is cheaper than renting.

With first-time buyer numbers estimated to be 2.7 million below expectations since 2008, 46% of homeowners in their 30s have relied on financial help from family or friends.

With many not expecting to receive an inheritance until their mid-40s to 60s, the option of gifting a living legacy by accessing property wealth through equity release or a later life mortgage looks set to grow in importance.

More broadly, decisive action is needed to address the fact that, among thirtysomethings who are not yet homeowners, 49% already feel this goal is unrealistic.

Will Hale, chief executive at Key, said: “Today’s ‘Home Advantage’ report from the Equity Release Council not only recognises how far the industry has come over the last 30 years in terms of product safeguards and innovation but also the thousands of lives it has positively influenced – helping older homeowners enjoy more secure retirements and facilitating the opportunity for many to help their loved ones.

“The ten trends that the report explores highlight how societal change has acted as a catalyst for the evolution of this market and the significant benefit homeownership has on the financial prospects of the individual and their wider family.

“According to Key’s H1 2021 Market Monitor, 25% of those who released equity from their home in 2021 did so to gift to friends or family.

“Far from being a selfish choice to access property wealth via lifetime mortgages, retirement interest-only products or downsizing, the ability to gift to the next generation at the point they need it most can be priceless.

“Equity release can be the enabler that allows children and grandchildren to view homeownership as a realistic ambition rather than an unattainable dream and could potentially save them over £300,000 across 30 years.”

Claire Singleton, chief executive of Legal & General Home Finance, added: “The ERC’s report demonstrates the value of home ownership and the significant positive impact it can have on your long-term financial wellbeing.

“However, getting onto the property ladder can be one of the more challenging financial goals that people face, particularly in a climate of double-digit house price growth.

“With this in mind, it’s perhaps no wonder that at Legal & General we are seeing a growing number of enquiries about how people can use their own property wealth to help loved ones secure their first home – we saw a 96% rise in the number of enquiries about gifting money to loved ones in the first five months of this year, compared to 2020.

“While gifting can be a really positive experience, for both parties, it’s important to fully consider the role property wealth will play in helping meet your own retirement needs before supporting loved ones.”

Alice Watson, head of marketing, insurance at Canada Life, said: “Property wealth has long been an important element of retirement planning.

“However, we all know that many people are finding it harder and harder to get on the property ladder, with many doing so much later than the previous generation. In fact, 54% of people who have not yet bought a home believe it is unrealistic they ever will.

 “For those who do manage to become homeowners the report shows that they will enjoy a significant financial safety net compared to long-term renters. While they may be borrowing more and paying off mortgages for longer than previous generations, the boost to their financial wellbeing will be considerable.

 “This normalisation of taking debt in later life means that property wealth will increasingly be used as another element of retirement income, and continue to be a way of funding the individual life ambitions and goals that we all carry.”


Sign up to our daily email